European energy challenge: best solution on alternative sources

Europe is a major energy consumer in the world. The world gas consumption amounted to about 3.314 trillion cubic metres, according to BP's latest statistical review. The European Union's gas consumption stood at 443.9 billion cubic metres, which was 13.4 percent of total global gas consumption.

At the same time Europe is the world's major importer of natural gas with Russia as one of the main suppliers. Europe's dependence on imported natural gas has increased over the years while its domestic gas production has declined. In 2012 Norway accounted for 35 percent of European natural gas imports, Russia - 34 percent, Algeria - 14 percent, Qatar - 10 percent. Nigeria, Libya and Egypt are among the other gas suppliers to the EU countries with three, two and one-percent shares respectively.

In total, EU member states imports approximately 64 percent of their natural gas supply. The European Commission predicts EU to import over 80 percent of its natural gas needs by 2030.

The European Union of the Natural Gas Industry (Eurogas) forecasts that the natural gas consumption in EU member states will increase by 43 percent to 625 million tons of oil equivalent (mtoe) in 2030 from 438 mtoe in 2005. At the same time the domestic production is expected to significantly decline.

Total European import of natural gas amounted to 377.2 billion cubic metres in 2012.

These figures that show that Europe will need natural gas which is expected to comprise 30 percent of its primary energy, in more and more volumes, present a challenge. The challenge consists of several facts. The first one is that European gas consumption will face a competition from the emerging economies, such as China and India, where the consumption is also expected to grow along with the rapid economic growth in those countries. The second fact is a great dependence on Russia and politically unstable Middle East and North Africa (MENA) producing region.

In spite of the fact that MENA has a great potential for producing and export gas, the security issue in this region causes a concern about its ability to constantly meet European energy needs.

In such situation search for new gas sources and security of energy supply has become viable for European countries.

With this regard the Caspian region seems to be the best way for Europe to achieve its goals. This region has sufficient gas reserves to be a potential supplier of alternative gas to Europe, which in its total volumes could be a serious competitor to Russian gas supplies.

Azerbaijan, Turkmenistan and Kazakhstan - three potential suppliers to the EU - in total have proved natural gas reserves of 19.7 trillion cubic metres, according to BP Statistical review. In 2012 these three countries produced 99.7 billion cubic metres while the consumption of gas in these countries in total amounted to 41.3 billion cubic metres. That means that potentially more than half of produced gas volumes are free for export.

With the large gas reserves in place the main issue on the way of Caspian gas delivery to Europe is the lack of transportation infrastructure. However, on this way Azerbaijan has made the first step, and has opened the gate for the Caspian gas into Europe. Azerbaijani gas will be the first gas from the Caspian region which will be transported to the European markets in the very near future.

Supplies of Azerbaijani gas to Europe in amount of 10 billion cubic metres will start in 2019. Under the sale agreements, signed in Baku in September, last year, nine companies will purchase Azerbaijani gas in Italy, Greece and Bulgaria. The last one will receive one billion cubic metres of Azerbaijani gas annually.

In 2012 Italy's dependence on Russian gas supplies was at 19.8 percent, while Greece's and Bulgaria's dependence was at 54.8 and 100 percent respectively.

As we can see, Azerbaijani 10 billion cubic metres will not only significantly meet gas demands, but also serve as an important alternative source for these countries. Moreover, it will open way for other Caspian region's countries, such as Turkmenistan and even Kazakhstan, to supply gas to Europe and thus significantly increase Europe's energy security.